Wall Street Bankers Threaten To Sue If Bonuses Aren't Big

WHY GOD? (Dmitriy Shironosov/Shutterstock)

According to the WSJ, Wall Street's end-of-year bonuses will shrink drastically thanks to dismal fourth-quarter figures. Around 400 partners at Goldman Sachs will see their net pay cut in half, while Morgan Stanley's bonuses may dip from 40% to 30%. Some socialist bankers (they exist) might suggest that a falling tide sinks all boats, but those idiots clearly haven't stepped aboard the Serene. Never ones to take fairness lying down, a group of executives at the brokerage firm Jefferies Group are threatening to sue or quit or both if their pay isn't up to par.

Jeffries' CEO released a memo last month warning employees that if they did quit, they'd be forced to return the portion of the bonuses they received, a stipulation that exists at many financial firms. But executives at the company are following in the footsteps of their pointy-toed brethren across the pond by threatening to sue.

"It's a terrible time to be an employee," a New York compensation lawyer tells the Post, as the score to Les Misérables presumably played softly in the background. He anticipates an uptick in lawsuits against companies who keep employee bonuses if they choose to walk. "In the next month or two, we're going to start seeing those cases." Curiously, he doesn't comment on the economy for financial services compensation attorneys.

The Journal does note a silver lining: because stock prices were low, more employees could be receiving shares instead of cash bonuses, which will presumably be worth more once their company's performance improves. But the real answer to the problem of these shrinking Wall Street bonuses? Get rid of all that pesky regulation.

Contact the author of this article or email tips@gothamist.com with further questions, comments or tips.

By Christopher Robbins in News on January 9, 2012 2:16 PM

Comments [rss]

NRafter530

Good quit, I'll take their job for NO bonuses.

J_12

People right out of business school (usually 27-28 yrs old) will get a base salary in the range of $100-125K/yr at big investment banks. They will typically get a bonus of about $100K for the first year. Base salary increases slowly (a director with 8-10 yrs experience will probably make around $200K in base salary.) The bonus payment increase much faster - that same director could get $1Million in bonus if he is good, a substantially more if he is a "top performer".

Since 2008, an increasing amount of this bonus has been paid in some form of deferred compensation - money that will be received over several years, and that may be forfeited if the employee decides to leave. This "clawback" feature is in the contract the employee must sign to receive the bonus, but not many have been tested in the courts, at least in the US. If you have a large amount at stake (maybe a few years of accumulated bonuses) you might as well lawyer up and test how well that contract holds up in court.

Rebecca

I didn't even GET a bonus, no one in my company did this year. I'm not planning on suing.

SpideySense

WSJ: "At Goldman, average compensation per employee would fall 10.7% to $385,000 for 2011 from $431,000 in 2010 if the New York company keeps its payout rate steady in the fourth quarter. In 2007, Goldman employees received an average of $661,000 each, and people throughout the firm are bracing for disappointment."

Sorry guys, but if you're still earning on average about $385,000 bonus, you won't get much sympathy from me. I've worked for companies that some years paid zero bonus, regardless of my consistent good performance.

theonlyseven

Do these D-bags realize that what they do is nothing special? It requires no remarkable talent, and skills that anyone could learn in 4 years in college. Every year schools all across the nation graduate countless eager beavers that would gladly take their jobs for a fraction of the pay and sans bonus just so they can start paying down their student loans. If they want to quit, let them. Fuck them. Fuck them with something hard and sandpapery.

Rocknrope

Points for using sandpaper as an adjective.

chuzzlewit

i could send them a picture of my ass, if that would help things....

MDC

Give them the jelly of the month club, the gift that keeps on giving!!

Guest

FUNDRAISER!

T. Funke

I think many people here are missing the point, which ISNT whether or not these people deserve bonuses.

Its where or not a company can demand a cash bonus back that they've ALREADY GIVEN from someone that decides they want to quit in the following year.

That may be something these employees agreed to when they were hired, who knows...

Guest

"a stipulation that exists at many financial firms"

TonyRawhide

No it doesn't.

S.D.

Actually, it does. It's called a 'bonus' but many Banks put a guaranteed 'bonus' Percentage in the bankers contract.

Used to be quite common.

TonyRawhide

The vast majority of bankers are not on guaranteed bonuses, despite what the media want people to believe. And even if they were, the practice of clawing back a bonus is not standard. It may be the case for a handful of very high paid / profile contracts, but by no means is it a standard practice today.

S.D.

Now that is true but the article mentions that SOME will sue. Under those contracts: they may have a leg to stand on.

It was common enough at 2 banks I know of.

Guest

then this would be the part where you provide evidence to counter the author's claims.
links or GTFOH.

TonyRawhide

Well, where is the author's proof? I am sure there may be some "financial firms" that have some type of stipulation, but it is by no means a standard practice today.

Politburo

If they don't have a contract, then it's "at-will employment", where the employer is generally free to change the terms at any time.

ETA: Note the clawback only kicks in if they go to work for a competitor.

T. Funke

yes, I'm familiar with the concept of at-will employment. I am also familiar with idea of being held liable for something if you sign a contract agreeing to it. What I don't understand is how a company can demand a bonus back from an employee just because they sent out a memo saying that they would.

Silence on the part of the employee does not constitute ratification of an "agreement", and I think this company would be laughed out of court if they tried to sue one of their employees to get a bonus back. also, non-compete clauses, should one exist in this case, be very difficult to uphold.

However, this article and the one in the link didn't go into too much depth, so if Im missing something they didn't mention feel free to fill me in.

kenorasis

What you're missing is that it ain't too hard to get someone to sign something when you're waving a big fat check in front of them. Also, since the memo mentions leaving for competitors within a year, it might be alluding to a non-compete already in place. Not too familiar with them in NY, but they are enforceable -- there just usually isn't much point unless the firm is particularly screwed by the departure.